Question 1

When wages rise,AS shifts _____ and aggregate price levels _____.

Accepted Answer

A)  left;fall 
B)  right;fall 
C)  right;rise 
D)  left;rise 
A)  left;fall 
B)  right;fall 
C)  right;rise 
D)  left;rise

Question 2

Use the following to answer questions:  
-(Figure: AD-AS)Refer to Figure: AD-AS.Suppose that initially the economy is at long-run equilibrium.If the government cuts taxes,_____ will shift to the _____.

Accepted Answer

A)  SRAS;right 
B)  SRAS;left 
C)  AD1;right to AD2 
D)  AD1;left to AD3 
A)  SRAS;right 
B)  SRAS;left 
C)  AD1;right to AD2 
D)  AD1;left to AD3

Question 3

Potential output is the level of real GDP that the economy would produce if all prices,including nominal wages,were inflexible.

Accepted Answer

A) True 
 B)False

Question 4

Use the following to answer questions:  
-(Figure: AD-AS Model II)Refer to Figure: AD-AS Model II.Which occurrence will raise the price level?

Accepted Answer

A)  SRAS curve shifts to the left. 
B)  SRAS curve shifts to the right. 
C)  AD curve shifts to the left. 
D)  The economy moves down the aggregate demand curve. 
A)  SRAS curve shifts to the left. 
B)  SRAS curve shifts to the right. 
C)  AD curve shifts to the left. 
D)  The economy moves down the aggregate demand curve.

Question 5

Use the following to answer questions:  
-(Figure: Policy Alternatives)Refer to Figure: Policy Alternatives.If the economy is in equilibrium at Y1 in panel (a),it is in:

Accepted Answer

A)  a recessionary gap. 
B)  an inflationary gap. 
C)  simultaneous short-run and long-run equilibrium. 
D)  full employment. 
A)  a recessionary gap. 
B)  an inflationary gap. 
C)  simultaneous short-run and long-run equilibrium. 
D)  full employment.

Question 6

If actual GDP is less than potential output,then the economy is:

Accepted Answer

A)  in an inflationary gap. 
B)  in a recessionary gap. 
C)  in a long-run equilibrium. 
D)  at full employment. 
A)  in an inflationary gap. 
B)  in a recessionary gap. 
C)  in a long-run equilibrium. 
D)  at full employment.

Question 7

If membership in labour unions falls,production costs will:

Accepted Answer

A)  increase,and SRAS will shift to the left,decreasing equilibrium GDP and increasing the aggregate price level. 
B)  fall,there will be a downward movement along SRAS,equilibrium GDP will increase,and aggregate price level will fall. 
C)  not change and AD will shift to the right,increasing equilibrium GDP and aggregate price level. 
D)  fall and SRAS will shift to the right,increasing equilibrium GDP and lowering the aggregate price level. 
A)  increase,and SRAS will shift to the left,decreasing equilibrium GDP and increasing the aggregate price level. 
B)  fall,there will be a downward movement along SRAS,equilibrium GDP will increase,and aggregate price level will fall. 
C)  not change and AD will shift to the right,increasing equilibrium GDP and aggregate price level. 
D)  fall and SRAS will shift to the right,increasing equilibrium GDP and lowering the aggregate price level.

Question 8

A recessionary gap can be closed by _____ wages that shifts the _____.

Accepted Answer

A)  falling;SRAS curve rightward 
B)  falling;LRAS curve rightward 
C)  falling;SRAS curve leftward 
D)  rising;SRAS curve rightward 
A)  falling;SRAS curve rightward 
B)  falling;LRAS curve rightward 
C)  falling;SRAS curve leftward 
D)  rising;SRAS curve rightward

Question 9

Use the following to answer questions:  
-In the late 1970s,the Canadian economy slid to the _____ along the aggregate _____ curve.

Accepted Answer

A)  left;supply 
B)  right;supply 
C)  left;demand 
D)  right;demand 
A)  left;supply 
B)  right;supply 
C)  left;demand 
D)  right;demand

Question 10

Potential output is the level of real GDP that:

Accepted Answer

A)  occurs when the economy has only cyclical unemployment. 
B)  the economy would produce if all prices,including nominal wages,were fully flexible. 
C)  occurs when the actual rate of unemployment is zero. 
D)  the economy would produce if all prices,including nominal wages,were sticky. 
A)  occurs when the economy has only cyclical unemployment. 
B)  the economy would produce if all prices,including nominal wages,were fully flexible. 
C)  occurs when the actual rate of unemployment is zero. 
D)  the economy would produce if all prices,including nominal wages,were sticky.

Question 11

If there is an inflationary gap,nominal wages _____,and the _____ curve shifts _____ until the economy reaches long-run equilibrium.

Accepted Answer

A)  fall;aggregate demand;left 
B)  rise;aggregate demand;right 
C)  fall;short-run aggregate supply;right 
D)  rise;short-run aggregate supply;left 
A)  fall;aggregate demand;left 
B)  rise;aggregate demand;right 
C)  fall;short-run aggregate supply;right 
D)  rise;short-run aggregate supply;left

Question 12

A simultaneous rise in productivity and nominal wages would shift the short-run aggregate supply curve to the:

Accepted Answer

A)  right if the rise in nominal wages is larger than the rise in productivity. 
B)  right if the cost per unit of output rises. 
C)  left if the cost per unit of output falls. 
D)  left if the rise in nominal wages is larger than the rise in productivity. 
A)  right if the rise in nominal wages is larger than the rise in productivity. 
B)  right if the cost per unit of output rises. 
C)  left if the cost per unit of output falls. 
D)  left if the rise in nominal wages is larger than the rise in productivity.

Question 13

Starting from its potential output,an economy's government increases spending.In the long run,this economy will produce at:

Accepted Answer

A)  an output level above its potential output. 
B)  its potential output. 
C)  an output level below its potential output. 
D)  its potential output level at a lower aggregate price level. 
A)  an output level above its potential output. 
B)  its potential output. 
C)  an output level below its potential output. 
D)  its potential output level at a lower aggregate price level.

Question 14

Which statement is TRUE with respect to short-run and long-run aggregate supply?

Accepted Answer

A)  The economy can be on both curves simultaneously. 
B)  If the economy is on the short-run aggregate supply curve,it cannot also be on the long-run aggregate supply curve. 
C)  If the economy is on the long-run aggregate supply curve,it cannot also be on the short-run aggregate supply curve. 
D)  The economy can never rest on both curves simultaneously. 
A)  The economy can be on both curves simultaneously. 
B)  If the economy is on the short-run aggregate supply curve,it cannot also be on the long-run aggregate supply curve. 
C)  If the economy is on the long-run aggregate supply curve,it cannot also be on the short-run aggregate supply curve. 
D)  The economy can never rest on both curves simultaneously.

Question 15

The relationship between the aggregate price level and the quantity of aggregate output demanded by households,businesses,the government,and the rest of the world is represented by the _____ demand.

Accepted Answer

A)  market 
B)  surplus 
C)  aggregate 
D)  simple 
A)  market 
B)  surplus 
C)  aggregate 
D)  simple

Question 16

A recessionary gap gradually:

Accepted Answer

A)  increases short-run aggregate supply. 
B)  decreases short-run aggregate supply. 
C)  increases aggregate demand. 
D)  decreases aggregate demand. 
A)  increases short-run aggregate supply. 
B)  decreases short-run aggregate supply. 
C)  increases aggregate demand. 
D)  decreases aggregate demand.

Question 17

Which factor will shift the short-run aggregate supply curve to the RIGHT?

Accepted Answer

A)  a widespread decrease in commodity prices 
B)  an increase in nominal wages 
C)  a decrease in productivity 
D)  a decrease in government purchases of goods and services 
A)  a widespread decrease in commodity prices 
B)  an increase in nominal wages 
C)  a decrease in productivity 
D)  a decrease in government purchases of goods and services

Question 18

The short-run aggregate supply curve will shift to the right if:

Accepted Answer

A)  commodity prices rise. 
B)  nominal wages rise. 
C)  productivity decreases. 
D)  nominal wages fall. 
A)  commodity prices rise. 
B)  nominal wages rise. 
C)  productivity decreases. 
D)  nominal wages fall.

Question 19

An increase in the prices of goods in the short run will:

Accepted Answer

A)  increase producers' profit per unit. 
B)  decrease producers' profit per unit. 
C)  lead to a movement along the AD curve. 
D)  reduce output. 
A)  increase producers' profit per unit. 
B)  decrease producers' profit per unit. 
C)  lead to a movement along the AD curve. 
D)  reduce output.

Question 20

Use the following to answer questions:  
-(Figure: AD-AS Model I)Refer to Figure: AD-AS Model I.If the economy is at point X,the appropriate fiscal policy is to:

Accepted Answer

A)  increase taxes and decrease government spending. 
B)  decrease taxes and increase government spending. 
C)  increase the money supply and interest rates. 
D)  decrease the money supply and interest rates. 
A)  increase taxes and decrease government spending. 
B)  decrease taxes and increase government spending. 
C)  increase the money supply and interest rates. 
D)  decrease the money supply and interest rates.

When wages rise,AS shifts _ and aggregate price levels _.

Use the following to answer questions: -(Figure: AD-AS)Refer to Figure: AD-AS.Suppose that initially the economy is at long-run equilibrium.If the government cuts taxes,_ will shift to the _.

Potential output is the level of real GDP that the economy would produce if all prices,including nominal wages,were inflexible.

Use the following to answer questions: -(Figure: AD-AS Model II)Refer to Figure: AD-AS Model II.Which occurrence will raise the price level?

Use the following to answer questions: -(Figure: Policy Alternatives)Refer to Figure: Policy Alternatives.If the economy is in equilibrium at Y₁ in panel (a),it is in:

If actual GDP is less than potential output,then the economy is:

If membership in labour unions falls,production costs will:

A recessionary gap can be closed by _ wages that shifts the _.

Use the following to answer questions: -In the late 1970s,the Canadian economy slid to the _ along the aggregate _ curve.

Potential output is the level of real GDP that:

If there is an inflationary gap,nominal wages ___,and the _ curve shifts ___ until the economy reaches long-run equilibrium.

A simultaneous rise in productivity and nominal wages would shift the short-run aggregate supply curve to the:

Starting from its potential output,an economy's government increases spending.In the long run,this economy will produce at:

Which statement is TRUE with respect to short-run and long-run aggregate supply?

The relationship between the aggregate price level and the quantity of aggregate output demanded by households,businesses,the government,and the rest of the world is represented by the _____ demand.

A recessionary gap gradually:

Which factor will shift the short-run aggregate supply curve to the RIGHT?

The short-run aggregate supply curve will shift to the right if:

An increase in the prices of goods in the short run will:

Use the following to answer questions: -(Figure: AD-AS Model I)Refer to Figure: AD-AS Model I.If the economy is at point X,the appropriate fiscal policy is to:

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

Gdp and the Cpi: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial System

Income and Expenditure

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

International Macroeconomics

Graphs in Economics

Filters

Exam 12: Aggregate Demand and Aggregate Supply

When wages rise,AS shifts _____ and aggregate price levels _____.

Use the following to answer questions: -(Figure: AD-AS)Refer to Figure: AD-AS.Suppose that initially the economy is at long-run equilibrium.If the government cuts taxes,_____ will shift to the _____.

Potential output is the level of real GDP that the economy would produce if all prices,including nominal wages,were inflexible.

Use the following to answer questions: -(Figure: AD-AS Model II)Refer to Figure: AD-AS Model II.Which occurrence will raise the price level?

Use the following to answer questions: -(Figure: Policy Alternatives)Refer to Figure: Policy Alternatives.If the economy is in equilibrium at Y1 in panel (a),it is in:

If actual GDP is less than potential output,then the economy is:

If membership in labour unions falls,production costs will:

A recessionary gap can be closed by _____ wages that shifts the _____.

Use the following to answer questions: -In the late 1970s,the Canadian economy slid to the _____ along the aggregate _____ curve.

Potential output is the level of real GDP that:

If there is an inflationary gap,nominal wages _____,and the _____ curve shifts _____ until the economy reaches long-run equilibrium.

A simultaneous rise in productivity and nominal wages would shift the short-run aggregate supply curve to the:

Starting from its potential output,an economy's government increases spending.In the long run,this economy will produce at:

Which statement is TRUE with respect to short-run and long-run aggregate supply?

The relationship between the aggregate price level and the quantity of aggregate output demanded by households,businesses,the government,and the rest of the world is represented by the _____ demand.

A recessionary gap gradually:

Which factor will shift the short-run aggregate supply curve to the RIGHT?

The short-run aggregate supply curve will shift to the right if:

An increase in the prices of goods in the short run will:

Use the following to answer questions: -(Figure: AD-AS Model I)Refer to Figure: AD-AS Model I.If the economy is at point X,the appropriate fiscal policy is to:

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

Gdp and the Cpi: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial System

Income and Expenditure

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

International Macroeconomics

Graphs in Economics

Filters

When wages rise,AS shifts _ and aggregate price levels _.

Use the following to answer questions: -(Figure: AD-AS)Refer to Figure: AD-AS.Suppose that initially the economy is at long-run equilibrium.If the government cuts taxes,_ will shift to the _.

Use the following to answer questions: -(Figure: Policy Alternatives)Refer to Figure: Policy Alternatives.If the economy is in equilibrium at Y₁ in panel (a),it is in:

A recessionary gap can be closed by _ wages that shifts the _.

Use the following to answer questions: -In the late 1970s,the Canadian economy slid to the _ along the aggregate _ curve.

If there is an inflationary gap,nominal wages ___,and the _ curve shifts ___ until the economy reaches long-run equilibrium.